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Resistance to Change in Management Strategies by British Airways Industry
In the current world, many things are changing as compared to what was traditionally there before. The technology used before by the companies has completely changed as compared to what is currently being used in the companies today. Additionally, the business trends that were there traditionally have also changed as compared to the current days. Lastly, the economic trends of the different countries in different parts of the world keeps on changing from time to time affecting the different companies. The only problem is, most companies have not yet adapted to the changes happening in the current world.
British airways have been affected by all this and it has not been able to adapt to the current situation. They have been slow to adapting to the changes according to the changes of the world. This has become a main problem in the British Airways where they have lagged behind in changing of their strategic management strategies. Therefore, the main problem with British Airways is lack of change in the managerial problem to adapt to the change in the modern world.
British Airways was first created in 1974 as a result of a merger between the British Overseas Airways Corporation and the British European Airways Corporation. In the past, British Airways was among the most profitable and prestigious companies in the whole of UK and the world. The company used to make good profits at the end of the accounting period and everybody wished to work in the company. This was because it used to provide a stable employment to its employees. After the world started to changed, the problems started to crop up. At first, in the 1980s, the problems deteriorated but it was saved by it being privatized. It started to look up and things were better again. However, it did not take time until the problems started to crop up again.
The first problem started when the world business trends started to change. The transport sector started to change completely and it became competitive. There was the introduction of new technology in the transport sector, which was cost effective. For instance, the introduction of high speed trains at an affordable price. Additionally, the customers started to change their taste in the transport sector. They started becoming more economical even the most expensive customers who were looking at class. Additionally, other cheaper competitors like Easy Jet started to offer cheap packages for the customers. This resulted to the British Airways having the financial crisis they are currently having. If this continues like this, the Airways is doomed for demise. Therefore, British Airways need to change their management strategies so that they end their financial crisis.
This report uses several methods of data collection both primary and secondary. For primary sources, the research has used books as one of the sources to search for the background information of the resources. Additionally, interviews have also been used as one of the method to get primary data for the report. On the other hand, there have been the use secondary sources. The use of the web sources has been the most significant resource in this report especially the news report. The data that have been collected is both of qualitative and quantitative data. After the use of these methods to collect data, there are several ways of analyzing data that have been used to analyze the data. Statistical analysis has been in this report to come with the analysis of the data that has been collected. Comparative analysis is another method of analyzing the data collected.
2.3 Critical Appraisal
The first source is by the ABC staff, which is an interview with one of the Virgin Atlantic management staff. It is about how Virgin Atlantic survived with the changing world and they have been able to maintain management strategies with the changing world. It is good for the comparison with what British Airways are doing to cope with the management changes. The other source is by Dayan and it is about what British Airways are doing so that they can change the management strategies. The first book source that has been used in this report is the Intermediate accounting where the effects of poor management strategies are shown practically. The other book sources foundation of airline finance is about how British airways could change their managerial skills to amend the changes. The other remaining sources by MSNmoney and the Telegraph are news sources of the effects poor management strategies in British Airways.
2.4.1 The main problem
The main problem for British Airways is the poor management strategies in relation to change to the modern ways. An organization of such high class and integrity should have ways to solve the problem but with the look of things, the organization is having managerial changes. In the past, the company was doing remarkably well making high profits at every end of the financial year. The company’s integrity had grown tremendously in the transport industry. It was termed as a company with class. However, troubles for the company started leading to it having financial crisis to due to lack of managerial strategies or resistance to change.
The company started to experience poor management strategies due to the resistance to change from the traditional methods to the modern methods. The modern changes of the world were because of the sky rocketing fuel prices. This meant an increase in fuel would to increase in expenses. Additionally, the company was suffering from the economic crisis or recession. The companies were being affected by the economy. Moreover, the strategic management of the company was poor in making the crucial decision for the company Lastly, all this changes have led the company to have financial crisis. These entire problems are as a result of British Airways is having poor management strategies as its main problem.
One of the causes of these poor management strategies is the change in the business trends. This is where the customers have been changing their behaviors from the traditional ways they were used to in the past to the modern ways of traveling. In the past, the customers used to travel for class. This is where the rich customers would travel using business class to create a high integrity or a name among the other rich people. This showed that they had taste class and respect in them. However, as times have passed by people have realized it is not necessary for them to gain respect through using expensive means there are other ways. This resulted to the customers moving away to other organizations, which are cheaper.
Another main problem that the organization is claiming to be the root cause of the poor management strategies is the rise in fuel costs for the airplanes. In the past, the fuel prices were low and easily assessable. This means that the expenses were relatively low since fuel was the expenses for the organization. Therefore, when the books of account were being computed the company made huge profits at the end of the accounting period. However, the times have passed by and the prices of the fuel have sky rocketed. This means that the profits have diminished and they have now changed to become losses. It is because of this reason; the management of British Airways is having management crisis due to resistance to change. Additionally, they are using the rise of fuel cost as an excuse and yet they are the ones who are having trouble
The other problem is the different competitors the company is experiencing. In the past, there were no competitors that would compete with British airways. It had already started to monopolize the industry leading the huge profits that they were enjoying. At that time, the company did not have any problems but this all changed with the creation of new competitors in the industry. One of the competitors is Easy Jet, which has come with cheaper packages for their customers. They were quick to change and they have created new packages known as the low carriers. This means that they offer low prices to their customers. This resulted to British Airways loosing most of its customers to Easy Jet because they were not able to change there management strategies quickly. With such a huge loss of customers, it meant that the organization would not make the remarkable sales that they used to and as a result, they started making losses.
Technology is another problem that has affected British Airways leading to this huge poor management strategies. In the past, technology had not yet evolved as compared to the current technology. Things have totally changed and companies are looking at providing the customers with the best services at a cheaper price. The problem for British Airways is not that it did not upgrade its technology; it is that technology evolved creating other cheaper and fast means of transport. Additionally, they did not have better methods of customer service. For instance, the speed trains are a result of the evolution of technology. The trains are cheaper faster and convenient to the customers as compared to the airplanes. However, this is only applicable to short distances. Moreover, they have good customer care services. This resulted to British Airways loosing its domestic customers moving within the country and other neighboring countries. In the process, it has led to the financial crisis the company is experiencing.
The Airways has also started loosing another main package, which was helping in the huge profits that it was enjoying. This is the cargo package where the Airline was transportng different kinds of cargo for its customers overseas. This means that the company was not only providing transport for people but also for the different types of cargo. The company never changed their strategies of winning the customers. On the other hand, the introduction of new cheaper packages by its competitors led to the loose of customers by British Airways.
The other problem that has led to the organization having poor management strategies is the economic depression the country and the world is experiencing. When there was a favorable economy, the organization was making a remarkable amount of profits. When the economy was stable the airline started was a having a stable management, this is because they were using the traditional methods. When the economic depression hit the airline, they did not change the management strategies leading to poor management strategies. The Airways has been forced to hike their prices leading to cater for their expenses. On the other hand, the increase in prices has lead to the Airways loosing customers to its competitors. In addition to this, the expenses have continued to increase with the high prices that have been brought about by the economic recession.
The payments British Airways are offering their staff member is another reason it is experiencing financial crisis. According to the international aviation boards, British Airways is spending a lot of money in paying their staff members. For instance, their Cubin Crew members are receiving approximately thirty thousand pounds as compared to Easy Jet, which is paying its Cubin Crew members approximately fifteen thousand pounds. This is also the same to the pilots. British Airways is paying its pilots twice as much its competitors like Easy Jet are paying their pilots. As a result, this has lead to the increase in expenses resulting to the financial crisis.
Lack of communication between the employees and the management is another cause of the financial crisis in British Airways. The management of the company is making decision for the company without even considering consulting with the employees. This results to resistance from the part of the employees leading to poor efficiency in their work. The customer care service started to provide the customers with poor services and in the end they lost high number customers.
The organization strategic management has been poor in solving these entire problems. For instance, the problem of competitors the organization could have also introduced new low carrier’s packages to solve the issues. Additionally, the airways should not be using fuel as their reason for financial crisis. This is because, its competitors are still thriving in the industries and yet they are using the same fuel. Therefore, instead of the company trying to solve the problems, they are only coming up with excuses. This has resulted in the organization having financial crisis. This means that the organizational poor management strategies have led to the problems the company is experiencing.
Due to the poor management strategies British Airways has been experiencing, it has resulted to certain effects affecting different parties in the industries. This is true because in situation, whether good or bad, there will always be parties affected. The only difference will be whether the parties will be affected negatively or positively. In this case, of British Airways, the most affected parties are the shareholders, the employees, the management, the customers care and the organizations itself.
One of the notable effects is the decrease in value of its shares. Since the organization started experiencing the management strategies, the values of its shares have gradually decreased. According to the market share, when a company is having financial crisis, the different shareholders will tend to sell all their shares. On the other hand, no potential shareholder would like to own the shares. This means that there will be an increase in supply and a decrease in demands. This can be illustrated by figure 1 where it shows the law of demand and supply. The shareholders can be the suppliers while the buyers can be the demand. If the shareholders increase the supply of their shares in the market definitely the demand will be low leading to reduction of share prices. Therefore, the suppliers will have to reduce their prices so that they can attract the consumers. As a result, the value of the share prices would decrease gradually.
A graph of demand and supply
Another effect of the poor management strategies British Airways is experiencing is the issue of the staff pension. The amount of pension that the British Airways have for its employees is a large sum of money. This money is not payable to the employees since the company is in financial crisis, that is, they cannot afford paying them. This kind of financial crisis are costing the employees more than the company itself is. This means that the employee both retired and still working will not be paid there pensions if the problem persists since they will be bankrupt. Therefore, the issue of staff pension is greatly affected by poor management strategies.
The other effect of poor management strategies in the organization is the strikes which the different employees are threatening to perform. Due to the poor management, the company cannot be able to pay the employees pension and the company is making cuts on their salary. In addition to this, the company us retrenching some of its employees. In reality, the employees have a right to ask what is rightfully theirs and if they are not given, they can result in measures, which will make the management of the company to meet their demands. In addition to this, the management of the company is not communicating to the employees on the kind of decisions they are making. It is because of this reason; the employees are threatening to strike. All this strikes are caused by the financial crisis the organization is experiencing.
One way the management of the company will be affected is the loss of jobs. Although the other employees of British Airways are affected, the management of the company will be adversely affected. This is because the management of the company will loose their integrity, respect and honor. For instance, if the manage to save the company from the financial crisis, they will gain respect, integrity and honor in the business world. On the other hand, if the management of the company fails to change the management strategies to save the company from the financial crisis, they will loose all the glory and no other company will employ them.
18.104.22.168 Customer Care
The customer care department is another department that has been affected by the poor management crisis. It has been affected due to the decision making of the management of the company. The management is making decision without consulting them thus demotivating the department. This has resulted in poor quality services from the customer care department. In the end the customers have run away to the other airlines.
Another effect of poor management of the Airline is experiencing is the reduction in the resalable value. When the organization was profitable, almost every investor wanted a piece of the cake. Its value was high since it had demand. This is based with on the law of demand and supply. The law states that when there is an increase in demand there is a decrease in supply and vice versa is true. This can be shown by the use figure 1. If the investors are demand and the suppliers are the owners of British Airways, then if the investor has a low demand on the company the supply will increase leading to the decrease of the resalable value of the company. Therefore, this means that at this moment when British Airways is in poor management crisis, its investors are pulling the money away and nobody wants a sinking ship. This results in the company lowering in its resalable value. It is also true because, one of the potential investor, Richard Branson, creator of Virgin Atlantic, was quoted saying that before when the company was doing well he was considering purchasing it but after the company went to poor management crisis he is no longer interested in the company.
Another possible effect is that the organization’s brand name will start loosing respect and integrity that it had commanded in the business world. People will no longer remember British Airways as the company that was once reputable and used to make high profits at the end of every financial year; it will be remembered as the company that wet down due to poor management crisis. Therefore, if the company was to be reopened it will take time before it regains back its glory. This is also similar to the saying, ‘it takes years to build respect, integrity and honor but it takes a moment to destroy all of them.
Another possible effect caused by the poor management crisis of British Airways will be bankruptcy. According to the trend the company is taking with the poor management crisis, it will result in the company becoming bankrupt due to financial crisis. This is because the company will no longer be able to pay its debts anymore. Once the airline has become bankrupt, it will lead to a total shut down of the company. This will be the end or the demise of the company. All this will be because of the poor management crisis the company is already experiencing.
2.5 Comparison of British Airways and Virgin Atlantic
Comparing the two airlines is a good ways to research on the issue of British Airrways poor management crisis. Based on the causes, which led to British Airways to have the poor management crises, they will be compared to what Virgin Atlantic has done to cope with the crisis. One of the major causes that have almost affected all the airlines is the economic depression. British Airways started to look for ways to reduce on their expenses so that they can be able to make profits. This led to the airline cutting of the pay packs that it was providing to its staff members. Despite the efforts, the organization continued to make losses at the end of their financial year. This means that British Airways is making bad management strategies.
On the other hand, Virgin Atlantic totally did the opposite what the British Airways did. Instead, they led massive campaigns to promote the airline on there twenty-five years anniversary since it was created. They decided to spend money so that they can increase the sales of the company. Many investors saw the move as unwise because the company was spending more money at these difficult times instead of cutting costs. However, this worked tremendously and the company was able to survive the financial crisis. Sales short up and the number of customers increased. This shows that British Airways has poor management strategies while the Virgin Atlantic is making excellent management strategies.
Another cause that led to the poor management crisis was poor communication between the management and the employees of British Airways. The employees of British Airways used to enjoy good pay packages higher as compared to the other airlines. However, when the management made the decision of reducing their packages they did not consult them. This resulted in inefficiency on part of the employees leading to poor services. Because of this, the customers opted to use other airlines. Therefore, instead of the company gaining profits, they reported losses at the end of every accounting period.
On the contrary, Virgin Atlantic had good communication system with their employees. The employees have always been appraised for the work they do and despite the financial crisis, they did not experience the pay cuts. As a result, the employees were motivated in performing their duties leading to high efficiency. These resulted in the company attracting more customers leading to the increase in sales. It is because of this reason, the company was able to survive financial crisis compared to their rivals British Airlines.
Another cause that led to the poor management crisis experienced by the British Airways was the change in the business trends by the different customers. In the past, there were traditions ways in which the company was enjoying profits from the increased sales. Customers used to enjoy their services. However, as time passed by, the business trends started changing. Customers started becoming more economical and those that were rich wanted an airline that will provide them with class. The only problem British Airways did was to ignore this change. Their competitors like Easy Jet saw this opportunity and provided customers with Low carriers.
On the other hand, Virgin Atlantic adopted new methods to cope with the financial crisis caused by change in business trends. They were swift to make the necessary changes and they had massive campaigns to promote these changes. As a result, the company started attracting even more customers leading to the increase in sales. This means that the company was able to survive the financial crisis while there counterparts ignored the consequences in the process. Therefore, the company was able to pull through with profits as compared to British Airways.
2.6 Possible solution to the problem
If the poor management crisis of the company continues like this, it might lead to the demise of the company. It is because possible solutions are needed for the company to survive in these difficult times. The management needs to have the best plan to come up with the best management strategies that will pool them out of the financial crisis they have been going through.
2.6.1 Measure issue
One of the possible issues for the management is that they have to measure the issue. This is where they will measure the extent at which the problem has escalated into so that they can be able to make the necessary changes. For instance, in the case of British Airways they need to come up with the necessary ways in which they can make the necessary management strategies. They need to stop resisting change so that they can be able to pull back into making profits again.
2.6.2 Action plan
After the company has finished measuring the issue affecting the company, they need to come up with an action plan that will help them in making profits in the current world. In the case of British Airways, they should start accepting change as the world is changing. Therefore, they should begin by changing the old strategies and incorporating the new strategies (Lancaster & Massingham, 2010, p. 255). One of the things they should incorporate in the action plan is by including the employees in decision-making.
2.6.3 Customer care management
The management should start considering the customers for a change since they are the backbone of the company. A good management team should be able to accept change in accordance to what the customers. On the other hand, the company decides to have the customer service department outsourced. This means a professional company in the area of customers will help. This will lead to the improvement of customer relations leading to increase in customers. Therefore, the management of the company can concentrate on other matters. This will solve the problem of change in business trends leading to the company having a good management with good management strategies.
2.6.4 Quality management
Many companies think that they do not need to perform a quality management check. The reality of the story is that companies need to perform it due to the change in the world business strategies, economy and other factors. Therefore, British Airways need to make the necessary changes because the world has changed a lot since they made the management strategies. This will lead to the improvement of the company management strategies thus lead to the change.
2.6.5 Quality Auditing
Lastly, the company management needs to perform quality auditing so that they can be able to keep up with the necessary changes. This helps the company management to keep in touch with the strategies they are making. For instance, if they had done this earlier they could have noticed that the world has changed and they need new strategies. In the process, they could not have been resistant to change. Therefore, the management needs to start considering the change as good thing and they stop becoming resistant to change.
In the current world today, many things have changed from what they used to be in the past. For example, the technology that was being used before has completely changed from what is currently being used today. In the business world the trends have also changed making the different companies to change their strategies. On the other hand, the companies that have not changed their strategies have fallen due to many problems. One of the companies, British Airways has been affected by the different changes of the world leading to poor management crisis. The causes of poor management strategies can be attributed to the sky rocketing fuel prices, the competition from competitors, the change in business trends and technology. This has affected British Airways due to change from the traditional ways to the modern ways.
The main problem of British Airways is poor management strategies and it has led to various effects in the company. Different parties have been affected ranging from the shareholders, the management, and the employees to the company itself. Therefore, it is because of the wide range of the affected parties, possible solution to the problem have been developed to solve the situation. The change of management strategies, needs to follow a series of new possible solution starting with measuring the issues, creating an action plan, good customer care department, Quality measurement and Quality auditing. This solution could make the management strategies stronger.
The first thing British Airways should do is try to change their management strategies. This is because of the ignorance of the management that led to this problem in the first place. They should stop becoming resistance to change. Secondly, the communication between the employees and the management should be improved to increase efficiency and reduce strikes. Another recommendation is that the company should try to create new packages that are customer friendly. Additionally, after creating them, they should use vigorous campaigns to advertise them. The other recommendation is that the company should other companies in the same industry to merger with so that their burden can be offloaded. If British Airways follows the recommendations, they will have remarkably strong management strategies.